The downward spiral of ISA rates shows no sign of slowing down any time soon; if anything, it's ramping up, with our latest data showing that average ISA rates have fallen substantially in recent months to hit fresh lows once again.
The figures, taken from the Moneyfacts UK Savings Trends Treasury Report – due to be published later this month – reveal some of the biggest ever reductions to average ISA rates for the second month running.
For example, the average one-year fixed rate ISA has fallen by 0.05% in the last month alone to stand at 1.09%, which in itself follows a dramatic monthly drop of 0.08% recorded in July. The table below highlights the significant downturn experienced in the last year, and as you can see, it isn't looking good for the market:
But why have rates fallen to such an extent? Charlotte Nelson, finance expert at Moneyfacts, sheds a bit of light on things:
"Faced with economic uncertainty and low SWAP rates, providers simply do not want or need savers' cash, which has caused the ISA market to plummet yet again. Not only that, but the sector continues to be decimated following the introduction of the Personal Savings Allowance in April: the average one-year fixed rate ISA has fallen 0.22% since the launch of the scheme.
"With savers able to earn £1,000 of interest tax-free, providers are questioning whether it is worth competing in what was once seen as a key market, which has forced rates ever-lower."
This is all extremely disappointing news for savers trying to find some hope in an already very gloomy savings market, with ISAs failing to have the appeal they once did. Indeed, these accounts have traditionally been where many savers stash their funds as rates were often higher than standard accounts, but today, the average long-term ISA rate pays significantly less than its non-ISA equivalent.
Unfortunately, things don't look set to change anytime soon. "With a cut to the Bank of England Base Rate predicted this week, this could be the final nail in the coffin for savers," concludes Charlotte. "However, they should not give up hope just yet, but they must work harder to seek out the best deals."
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